FAQs

1. Are there rules, regulations, or laws that specifically prohibit advance payments or prepayments?
   
   
2. Can departments pay claims against reverted appropriations from current appropriations? Does Finance need to approve reverted year claims?
   
   
3. Can departments use current year appropriations to pay for services and/or goods to be delivered in the next fiscal year?
   
   
4. What laws and/or rules regulate the acceptance of gifts?
   
   
5. How are late payment penalties calculated?
   
   
6. What is the definition of equipment? What costs are recorded in the property register?
   
   
7. What is a Payee Data Record (STD. 204) and why must the payee complete it before the State can make a disbursement?
   
   
8. Why is the State exempt from the Utility Users Tax assessed by local governmental entities?
   
   
9. Is there a glossary or a definition for each expenditure object code in the Uniform Codes Manual (UCM)?
   
   
10. Can departments issue agency checks when the current year Budget has not been passed?
    
    
11. How should CAL-Card rebates be recorded?
    
    
12. How do departments obtain FSCU approval, as required by some sections of the State Administrative Manual (SAM), or fiscal policy clarification/assistance? How long does the process take?
    
    
13. Is FSCU responsible for the content in all sections of the State Administrative Manual (SAM)?

If you have other questions or issues within the area of responsibility of the FSCU, Department of Finance, please call the FSCU Hotline at 324-0385 or e-mail FSCUHotline@dof.ca.gov. If your question(s) requires a detailed analysis, forward a letter to, FSCU, Department of Finance, 915 L Street, Sacramento, CA 95814, IMMS A-15.

The California Constitution Article XVI, Sec. 3 and Sec. 6, prohibits gifts/donations of public funds. Since the State has received no benefit and the subsequent receipt of goods/services cannot be guaranteed, a prepayment is considered a gift of public funds.

The State Controller’s Office requires claims presented for payment to include a penalty of perjury certification that the services were rendered and the supplies were delivered. (See Claim Schedule, STD. 218 Cont., 218DD, and 218ET.)

Advance payments must be specifically authorized by statute (State Contracting Manual Section 7.32). The following advance payments are permissible:

• Any department which, as a part of its regular operations, performs work for other departments may require payments in advance (Government Code [GC] Section 11258; State Administrative Manual [SAM] Section 8471.1)
• Advance payments between departments are permissible to mitigate an adverse effect to the appropriation of the performing department (GC Section 11257; SAM Section 8453).
• Under certain conditions, specific departments may advance payment to a community-based private nonprofit agency (GC Section 11019).
• Under certain conditions, departments, except the Department of Social Services, may advance payment to a county (GC Section 11019.5).
• The office revolving fund may be used to advance payment for federal publications, postage, meter services, travel expenses, and registration fees (GC Section 16401; SAM Sections 8110-8116).
• Subject to all federal provisions and Department of Finance approval, departments may advance payment of federal block grants to contractors or local governments (GC Section 16366.7).

Departments may pay claims against reverted appropriations from any current year appropriation available for the same purpose, e.g., a claim against a reverted support appropriation may be paid from a current year support appropriation (GC Section 16304.1; SAM Section 8422.7).

Finance approval is not required for such claims.

Expenditures/encumbrances are charged to the fiscal year that the goods/services are delivered when the purchase agreement stipulates that delivery be delayed until requested or delayed until on or after a specific date.

Expenditures/encumbrances are charged to the fiscal year that the purchase agreement is issued when the delivery date is construed to mean as soon as possible. As soon as possible includes a delivery date that is:

• Not identified or specific.
• Specific but not a requested delay in delivery.
• Specified as 10 days, 30 days, or the like.

An agreement is issued as of the date it is "made and entered into". Any required control agency approvals are retroactive to that date.

Agreements which cross fiscal years may be charged totally to the first year of appropriation or more than one fiscal year, depending on the:

• Details of the agreement
• Above delivery date criteria
• Appropriation authority

The statutory and regulatory provisions are in GC Sections 8647, 11005-05.1, 16302; and the SAM Sections 1323.12, 8634. Gifts may be either real property or personal property such as cash or equipment. A gift of real property must be approved by Finance after review by the Department of General Services. (GC Sections 11005-05.1; SAM Sections 1323.12, 8634) A gift of personal property must be approved by Finance, except:

• Unconditional monetary gifts which must be deposited in the State School Fund (GC Sections 11005, 16302; SAM Section 8634).
• Monetary gifts where the only condition is the designation of a particular fund in the State Treasury (GC Sections 11005, 16302; SAM Section 8634).
• Departments or funds statutorily exempted from Finance approval (GC Section 11005; SAM Section 8634).

See additional information, including a form for departments to request Finance approval to accept a gift.

The invoice amount less sales tax or the amount due is multiplied by the penalty interest factor per day to arrive at the daily penalty. The daily penalty is then multiplied by the number of days the payment is late to calculate the total penalty amount. The required payment date and penalty rate are determined as follows:

• The California Prompt Payment Act requires State agencies to automatically calculate and pay the appropriate late payment penalties if they fail to pay properly submitted, undisputed invoices or defined grant (SAM Section 8474.4) claims on the date required by the contract or grant. If a payment date is not specified in the contract or grant, payment must be made within 45 calendar days of receipt of the invoice or claim: 30 days for the departmental payment approval process and 15 days for the State Controller’s Office audit and disbursement process. Departments must pay the applicable penalties without requiring an additional invoice for the penalty amount (GC Section 927 et seq.).

1. The penalty interest factor per day for a small business and a nonprofit organization is 0.25 percent. However, a nonprofit organization shall only receive a penalty payment if it has been awarded a contract or defined grant that is less than $500,000 (GC Sections 927.6, 927.7).

2. The penalty rate, per annum, for any other business or local defined grantees is 1 percent above the Pooled Money Investment Account rate as of June 30 of the preceding year. Finance annually issues a Budget Letter informing departments of the current penalty rate and the penalty interest factor per day. Penalties of $75 or less will not be paid. (GC Section 927.6; SAM Section 8474 et seq.)

• Undisputed payments not subject to the California Prompt Payment Act or any other statute (e.g., refunds) will be paid within 30 calendar days after the department notifies the person or the person notifies the department of the amount due the person. The penalty rate, per annum, is 1 percent below the Pooled Money Investment Account rate. Finance annually issues a Budget Letter informing departments of the current penalty rate and the penalty interest factor per day. (GC Section 926.19; SAM Section 8474 et seq.)

The penalty payment is related to the fiscal year the penalty is incurred, not the fiscal year the invoice is payable from.  (The two can be the same; however, at the beginning of a new fiscal year, two fiscal years are often involved.)

• Penalties incurred in the prior fiscal year (prior July 1 to June 30) are prior year expenditures.  The penalty is calculated at the prior year rate and paid from a prior year appropriation.

• Penalties incurred in the current fiscal year (July 1 forward) are current year expenditures.  The penalty is calculated at the current year rate and paid from a current year appropriation.  Note:  Current year penalties are not payable until a current year Budget Act has been enacted.

Equipment is defined in the Property Accounting section of the SAM as all tangible personal property that meets the capitalization criteria set forth in the SAM Section 8602.

The acquisition cost of all property, capitalized and non-capitalized, is included in the property register. All costs to acquire, install, and prepare property for its intended use are included in the acquisition cost. This amount is used to determine if the property meets the capitalization criteria. In addition, the capitalized segment of the property register serves as the subsidiary ledger to the General Fixed Assets Account Group (SAM Section 8600 et seq.).

A Payee Data Record (STD. 204) is a form the State requires of any non-governmental entity entering into a business transaction that may lead to a payment from the State. If a payment is reportable to the Internal Revenue Service and/or the Franchise Tax Board, the State prepares an information return for the Taxpayer Identification Number (TIN) provided by the payee on the STD. 204. The TIN for an individual or a sole proprietor is his/her Social Security Number. (Internal Revenue Code Section 6109(a); Revenue and Taxation Code Section 18646; SAM Section 8422.19 et seq.)

8. Why is the State exempt from the Utility Users Tax assessed by local governmental entities?

Cities and counties possess the power to levy utility users taxes; however, that power is limited in application to the State. As a general principle, it has long been declared that the State is ordinarily regarded as exempt from taxes imposed by a local entity. Therefore, the Legislature must expressly limit or waive the State’s immunity for the State to be subject to local taxation.

9. Is there a glossary or a definition for each expenditure object code listed in the Uniform Codes Manual (UCM)?

No, there is no glossary or definition for the object codes. The State accounts and reports on a budgetary basis. As such, departmental budget staff establish allotments for object codes and the expenditures should be consistent with the budgetary allotments. In addition, comparability should be maintained from year-to-year.

Yes, departments can disburse general cash to:

• Issue refunds (SAM Section 8095).
• Remit money to the State Treasury (SAM Section 8091).
• Purchase or buy back dishonored checks from the bank (SAM Section 8043).

Departments can disburse revolving fund cash for:

• Prior fiscal year payments (SAM Section 8110).
• Payment to an employee for salary earned when errors or delays prevent the payroll warrant from being delivered (SAM Section 8595).

The CAL-Card rebate is a performance bonus that is distributed by the credit card company to departments for timely payment of invoices.  Because the rebate cannot be identified to a specific invoice or vendor, the bonus will be classified as Miscellaneous Revenue for those departments whose primary funding source is a governmental cost fund.  Departments whose primary funding source is a nongovernmental cost fund will use Operating Revenue, Other.

Additional rebate information is available at the Department of General Services CAL-Card website, see FAQ question #4 at: Cal-Card Frequently Asked Questions.

The Accounting Officer must submit a written request on departmental letterhead to:

Fiscal Systems and Consulting Unit, IMMS A-15
Department of Finance

915 L Street

Sacramento, CA 95814

The request must include all pertinent information necessary to review the request such as:

• Description of request; including description of current process if change is proposed
• Information required in applicable SAM section
• Justification for request
• Listing of costs and/or dollar amounts involved
• Completed forms, if required (e.g., form AUD-10 for Special Deposit
  Fund accounts)
• Contact name, e-mail address, and telephone number

Please include the e-mail address and telephone number of a contact person so that we can acknowledge the receipt of your request. The request will be assigned to an analyst for review. A written response will be provided in approximately 3 to 4 weeks.

13. Is FSCU responsible for the content in all sections of the State Administrative Manual (SAM)?

No, FSCU is only responsible for specific sections of SAM. The responsible department and contact person for all SAM sections are listed in SAM Section 0030.